Guaranteed Stockmarket Bond

The stockmarket has, in the last couple of decades, outperformed other types of investment. But the stockmarket can be a risky place which can suddenly lose you a chunk of your money at a moment's notice. The solution for the slightly nervous may be the 'Guaranteed Stockmarket Bond'.

These investments come in a variety of packages, usually from insurance companies. They all have the same basic aim - to give you a return based on rising share prices but with a guarantee that you will not lose your original capital. Most of the schemes are marketed as fixed-term policies (usually five years).

When your policy matures you are guaranteed to get back the higher of two sums, either your original investment or your investment increased in line with whatever benchmark (usually the FTSE-100 ) is being used.

There are also guaranteed equity bonds offering to guarantee you a high rate of income - much higher than is available in any other form.

They also aim to pay back your original capital at the end of the period, provided that the stockmarket has performed well enough. If not, you get less than your original investment back - effectively your high income will have been sustained partly by payments out of your capital.

If you're looking at investing in guaranteed bonds, make sure you know which type you are buying into. These products can be complicated and in some ways for that reason they may not be desireable.

See Also: Online share dealing service Stockmarket Centre

Last Updated: August 2007 © Moneyextra.com

Our senior editor Robin Amlôt recommends you should consider taking independent financial advice before acting on any article. Please contact us for help with your individual circumstances if any assistance is required.